Uganda should have reason to get worried over the financing of its oil and gas development project, as global lenders play wait-and-see, while others have already reportedly distanced themselves.
More than US$ 10 billion is due to be spent on developing various oil and gas projects over the next three to five years. They include upstream activities like the field and central crude oil processing facilities, crude oil pipelines from the fields to the Central processors, among others.
Midfield projects will include a US$ 3.5 billion East African Crude Oil Pipeline to export oil from the Central processing facilities in Hoima to Tanga Port in Tanzania, the US$ 2.5 billion refinery in Hoima as well as the storage terminal in Wakiso.
However, all this money is supposed to be raised by the investors largely from international lenders. So far the companies involved are the Uganda National Oil Company, UNOC, the Tanzania Petroleum Development Corporation, Total Energies of France and China’s CNOOC.
But calls by local and international NGOs on the Uganda and Tanzania governments not to carry on with the projects, and on lenders not to finance the industry, intensified in April following the signing of agreements in Kampala giving a greenlight to the investors to proceed. The #StopEACOP campaign, an international crusade against Uganda’s oil and gas and specifically the EACOP project says the pipeline will emit 34 million tons of carbon per year, equivalent to total emissions by 7.4 million cars.
The NGOs base on this to discredit the project as dangerous to the environment, as well as on the disruption of lives of persons along the project route. They also cite the ecosystem in the Albertine Graben saying it’s a great risk of destruction. However, both the government and the oil companies say that they have put a lot of control measures based on international standards and domestic policies, to ensure protection for the environment and human lives.
The Africa Energy Chamber Chairman, NJ Ayuk told URN that the crusaders know very little about the industry, and how much the Industry cares about the environment.
The same view has been expressed by the outgoing Permanent Secretary in the Ministry of Energy and Mineral Development, Robert Kasande.
In April, it was reported that the three largest French banks, BNP Paribas, Société Générale and Crédit Agricole, would not be financing the EACOP, bringing to six the total number of banks that have publicly stated they will not back the project, according to the campaigners. They added that the French banks join Barclays, Credit Suisse and ANZ, all significant financiers of Total, “in deciding to steer clear of the project.”
“The UK’s Export Credit Agency, UKEF, also ruled the project out for finance last month, as it moved to implement a decision to stop financing fossil fuel projects overseas. And last year, the African Development Bank also ruled out direct finance for the project, saying that it sees renewable energy as the future for the continent,” It says.
Ayuk says for purposes of accountability, Civil Society is important to the industry, but that it shouldn’t stifle Africa’s development by giving biased or wrong information.
But whether or not the campaign is correct, or genuine will be seen how much the industry suffers due to lack of financing.While Kasande was adamant it would have an adverse effect on the industry, Ayuk said there is cause for worry by Uganda and the partners about the financing needs if the NGOs succeed.
He suggests that Africa must start looking at African solutions, including seeking to raise the money from her resources, but adds that there are other alternatives to western financing like India and China, though tough negotiations are needed on China’s loans.
On Uganda and Africa’s need to curb carbon emissions, Ayuk agrees that there is a problem, but says Africa’s contribution to climate change is the least and the continent should not be punished for the crimes of the more developed west.